Inventory Planning Blog

How Advanced Inventory Planning Helps Enhance the MRP Planning

Posted on Tue, Feb 03,2015@10:00 PM

inventory optimization, inventory planning, bill of materialsAdvanced inventory planning and optimization solutions enhance the MRP process by automating inventory planning and replenishment.  It automatically selects the best forecast algorithm for every item at every location and creates a rolling forecast of from 12 to 36 months.  The solution then calculates an optimal stocking quantity for each item based on many critical variables like the lead time, order frequency, and target service level.  Variability in demand is also considered along with other key factors ensuring the right amount of stock is available without creating an overstocked situation.

Advanced inventory planning software provides strategic visibility into the user’s inventory investment and identifies excess and inactive inventory.  Items requiring replenishment are automatically added to the daily Replenishment List for easy review and approval. Once approved, it transmits the information to the ERP system and creates the appropriate documents.

The basic purpose of Material Requirements Planning (MRP) is determining how much of which products needs to be either manufactured or purchased based on it being a component or ingredient of another item. MRP also determines when the product is required. Every item can have either Independent Demand or Dependent Demand.

inventory planning, optimized inventory planning, valogixIndependent Demand is based on an item being an end product of a manufacturing facility. Dependent Demand is based on an item being used, consumed, absorbed, destroyed, etc. in the manufacturing process of making other items. This might include raw materials, purchased parts, sub assemblies, or complex parts that are also themselves manufactured or assembled. Some dependent demand may be the result of waste or scrap from the manufacturing process.

An MRP system is intended to simultaneously meet three objectives:

  • Ensure materials and products are available for production and delivery to customers
  • Maintain the lowest possible level of inventory
  • Plan manufacturing activities, delivery schedules and purchasing activities

MRP Inputs

  • Forecasts are created for the finished goods. These forecasts can either be generated statistically from historic demand or as sales projections.
  • Planned Orders are either firm sales orders from customers or other manufacturing orders requiring the product to be planned as an input.

Bill of Materials (BOM) is the document that articulates each input item, along with a quantity and whether the item will be accounted for automatically (backflush) or manually issued for the production process.

 

An MRP system is intended to simultaneously meet three objectives:

  • Ensure materials and products are available for production and delivery to customers
  • Maintain the lowest possible level of inventory
  • Plan manufacturing activities, delivery schedules and purchasing activities

 MRP Inputs

Forecasts are created for the finished goods. These forecasts can either bill of materials, inventory planning, inventory optimization, valogix, sap, netsuitebe generated statistically from historic demand or as sales projections.
Planned Ordersare either firm sales orders from customers or other manufacturing orders requiring the product to be planned as an input.

Bill of Materials (BOM) is the document that articulates each input item, along with a quantity and whether the item will be accounted for automatically (backflush) or manually issued for the production process.

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Tags: Inventory Planning, inventory optimization, manufacturing